from the boston globe- as liberal as it gets



*
'THE PRIVATE SECTOR got us into this mess. The government has to get us
out of it."
Discuss
COMMENTS (355)

That's Barney Frank's story, and he's sticking to it. As the
Massachusetts Democrat has explained it in recent days, the current
financial crisis is the spawn of the free market run amok, with the
political class guilty only of failing to rein the capitalists in. The
Wall Street meltdown was caused by "bad decisions that were made by
people in the private sector," Frank said; the country is in dire straits
today "thanks to a conservative philosophy that says the market knows
best." And that philosophy goes "back to Ronald Reagan, when at his
inauguration he said, 'Government is not the answer to our problems;
government is the problem.' "

In fact, that isn't what Reagan said. His actual words we "In this
present crisis, government is not the solution to our problem; government
is the problem." Were he president today, he would be saying much the
same thing.

Because while the mortgage crisis convulsing Wall Street has its share of
private-sector culprits -- many of whom have been learning lately just
how pitiless the private sector’s discipline can be -- they weren't the
ones who "got us into this mess." Barney Frank's talking points
notwithstanding, mortgage lenders didn't wake up one fine day deciding to
junk long-held standards of creditworthiness in order to make ill-advised
loans to unqualified borrowers. It would be closer to the truth to say
they woke up to find the government twisting their arms and demanding
that they do so - or else.

The roots of this crisis go back to the Carter administration. That was
when government officials, egged on by left-wing activists, began
accusing mortgage lenders of racism and "redlining" because urban blacks
were being denied mortgages at a higher rate than suburban whites.

The pressure to make more loans to minorities (read: to borrowers with
weak credit histories) became relentless. Congress passed the Community
Reinvestment Act, empowering regulators to punish banks that failed to
"meet the credit needs" of "low-income, minority, and distressed
neighborhoods." Lenders responded by loosening their underwriting
standards and making increasingly shoddy loans. The two government-
chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged
this "subprime" lending by authorizing ever more "flexible" criteria by
which high-risk borrowers could be qualified for home loans, and then
buying up the questionable mortgages that ensued.

All this was justified as a means of increasing homeownership among
minorities and the poor. Affirmative-action policies trumped sound
business practices. A manual issued by the Federal Reserve Bank of Boston
advised mortgage lenders to disregard financial common sense. "Lack of
credit history should not be seen as a negative factor," the Fed's
guidelines instructed. Lenders were directed to accept welfare payments
and unemployment benefits as "valid income sources" to qualify for a
mortgage. Failure to comply could mean a lawsuit.

As long as housing prices kept rising, the illusion that all this was
good public policy could be sustained. But it didn't take a financial
whiz to recognize that a day of reckoning would come. "What does it mean
when Boston banks start making many more loans to minorities?" I asked in
this space in 1995. "Most likely, that they are knowingly approving risky
loans in order to get the feds and the activists off their backs . . .
When the coming wave of foreclosures rolls through the inner city, which
of today's self-congratulating bankers, politicians, and regulators plans
to take the credit?"

Frank doesn't. But his fingerprints are all over this fiasco. Time and
time again, Frank insisted that Fannie Mae and Freddie Mac were in good
shape. Five years ago, for example, when the Bush administration proposed
much tighter regulation of the two companies, Frank was adamant that
"these two entities, Fannie Mae and Freddie Mac, are not facing any kind
of financial crisis." When the White House warned of "systemic risk for
our financial system" unless the mortgage giants were curbed, Frank
complained that the administration was more concerned about financial
safety than about housing.

Now that the bubble has burst and the "systemic risk" is apparent to all,
Frank blithely declares: "The private sector got us into this mess."
Well, give the congressman points for gall. Wall Street and private
lenders have plenty to answer for, but it was Washington and the
political class that derailed this train. If Frank is looking for a
culprit to blame, he can find one suspect in the nearest mirror.

Jeff Jacoby can be reached at .
© Copyright 2008 Globe Newspaper Company.
READER COMMENTS (354) Post a comment

You folks from Massachusetts will have an opportunity to oust this
numbskull and help the country as a whole.

We in Nevada will deal with Harry as well. You folks from Massachusetts
will have an opportunity to oust this numbskull and help the country as a
whole.

We in Nevada will deal with Harry as well.
Collapse comment
by linnpater October 03, 7:36 PM
Report Abuse

So, you sons and daughters of Minutemen, are you going to re-elect this
disaster of an overseer? National accountability should start with you.
So, you sons and daughters of Minutemen, are you going to re-elect this
disaster of an overseer? National accountability should start with you.
Collapse comment
by klesb October 03, 7:31 PM
Report Abuse

Sounds like an ideal liberal plan. As holder of the mortgage the gummint
would be entitled to the interest payments (a stealth tax!) Sounds like
an ideal liberal plan. As holder of the mortgage the gummint would be
entitled to the interest payments (a stealth tax!)
Collapse comment
by Dont-Trustem October 03, 7:20 PM
Report Abuse

All I want is for some one to stand up and tell me the Truth. I am an
american and I have lost faith in what was the americam way, Truth,
honor, country. I just want to know how a 2 year senator gets... Click
here to see full comment All I want is for some one to stand up and tell
me the Truth. I am an american and I have lost faith in what was the
americam way, Truth, honor, country. I just want to know how a 2 year
senator gets to run for Pres. With his back ground, Something is wrong
here. We are not getting the whole truth, why can't someone stand up and
tell us the whole truth.
Collapse comment
by iamanamerican1st October 03, 7:01 PM
Report Abuse
VIEW ALL READER COMMENTS (354)

* Email
* Email
* Print
* Print
* Single page
* Single page
* Reprints
* Reprints
* Share
* Share
* Comment
* Comment
*

LOG IN OR REGISTER TO POST
Existing users
E-mail:
Password:

Login
Forgot your password?
New users
Please take a minute to register. After you register and pick a screen
name, you can publish your comments everywhere on the site.

Register


TRUSTe Certified Privacy

* Share on DiggShare on Digg
* Share on Facebook
* Tag with Del.icio.us Save this article
* powered by Del.icio.us

Your Name Your e-mail address (for return address purposes) E-mail
address of recipients (separate multiple addresses with commas) Name and
both e-mail fields are required.
Message (optional)
Disclaimer: Boston.com does not share this information or keep it
permanently, as it is for the sole purpose of sending this one time e-
mail.
Ads by Google what's this?
Mortgage Relief - Now
Avoid Foreclosure - Keep Your Home! Call 888-202-5662 to Learn More.
www.apply2save.com
Fort Myers Mortgages
Fixed rate mortgage loans Home Loans, Foreclosures, Refinance
hartmortgageservices1.com
Government Seized Homes
Find Government Foreclosures Here Enroll for New Listing Updates!
www.BelowReplacementCost.com
Advertisement
INside Boston.com

* Weekend picks
Looking for fun this weekend? Check out our picks
Looking for fun this weekend? Check out our picks
* The Seen
The Seen
See who was spotted around town in Bill Brett's party photos
* PHOTO GALLERY
7 pumped up pumpkins
7 pumped up pumpkins
* The ink tank
The best editorial cartoons of the week
The best editorial cartoons of the week
*
Plus...
o Blogs
o |
o Games
o |
o Podcasts
o |
o Puzzles
o |
o Personals
o |
o Movie listings
o |
o Classifieds
o |
o Globe Magazine



MOST E-MAILED

1. Frank's fingerprints are all over the financial fiasco
2. Prize-winning noodle kugel
3. 7 pumped up pumpkins
4. Not your ordinary tourist: Manatee visits Cape Cod
5. Pumped up
6. The Ink Tank: a daily roundup of editorial cartoons
7. Two stabbed, shots fired in busy downtown shopping district

See full list
Recommended Searches

* Ig Nobel
* Fall foliage
* Giant Pumpkin

* Clark Rockefeller
* Contractors
* Farm stands

About this list

Click here for Old Sturbridge Village discounts.

Let your new home find you with email alerts

* Home
* |
* Today's Globe
* |
* News
* |
* Business
* |
* Sports
* |
* Lifestyle
* |
* A&E
* |
* Things to Do
* |
* Travel
* |
* Cars
* |
* Jobs
* |
* Homes
* |
* Local Search

* Contact Boston.com
* |
* Help
* |
* Advertise
* |
* Work here
* |
* Privacy Policy
* |
* Newsletters
* |
* Mobile
* |
* RSS feeds
* |
* Make Boston.com your homepage

* Contact The Boston Globe
* |
* Subscribe
* |
* Manage your subscription
* |
* Advertise
* |
* The Boston Globe Extras
* |
* The Boston Globe Store
* |
* © 2008 NY Times Co.